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Autumn Budget: spending spree doesn’t disguise £2tn challenge ahead for the UK economy

The Autumn Budget 2017 brought home the fiscal and economic challenges facing the UK. Our debts continue to grow and eliminating the deficit is rapidly becoming a five parliament problem and a millstone for future generations.

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"Planning for the next quarter is not enough, we need a plan for economic strength throughout the next quarter of a century."

The Autumn Budget was an opportunity to convince the country there is a long-term vision for the economy. Planning for the next quarter is not enough, we need a plan for economic strength throughout the next quarter of a century. This is particularly important as we have seen business confidence fall into negative territory and businesses becoming significantly more cautious when it comes to investing.

The Chancellor’s focus was on the short-term and there were a few immediate benefits for business

Most significantly, the Chancellor did not lower the threshold for compulsory VAT registration for the current limit of £85,000 to the level suggested by the Office for Tax Simplification of £20,000. This would have hit many small businesses hard.

In addition, many small businesses sell to consumers who are unable to recover the VAT. So the business would have been faced with making a 20% increase in the sailing prices or cutting their gross margin. Instead the VAT registration threshold is held at £85,000 for two years.

Other good news for business was the change in business rate increase from April 2018 being changed to the Consumer Price Index (CPI) from the Retail Price Index (RPI). This will have the impact of lowering the increase by 1%.

Businesses in the technical sectors will also welcome the investment in maths and science in schools. The investment in construction and digital training courses will help businesses in those sectors having difficulty recruiting school-leavers.

Limited companies investing in Research and Development will benefit from the increase in the tax relief for large companies (and small and medium sized enterprises in some cases) that carry out qualifying R&D and claim Research and Development Expenditure Credit (RDEC).

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"To some extent, uncertainty is to be expected, but policymakers need to start showing there are good reasons to invest in technology, training and development, as well as new products and services to help drive economic growth in 2018 and beyond."

These announcements are unlikely to resolve the long-term situation

Changes to business rates and reliefs for R&D will be welcome news for firms, but the Autumn Budget will probably not have a major impact on business who are facing the challenges of Brexit and continuing high inflation

The Government needs to develop a longer term plan than simply making it through the next few years. To some extent, uncertainty is to be expected, but policymakers need to start showing there are good reasons to invest in technology, training and development, as well as new products and services to help drive economic growth in 2018 and beyond.

The Chancellor’s success will lie in setting the conditions to promote greater investment, both publicly and privately, and ultimately nurture innovation and make the UK more competitive. Businesses need to match Government investment in skills and new technology if the UK economy is to recover its momentum.

One particular area that the Government should target is the tax code. The current tax code is bloated and complicated, but once again, the Chancellor missed the opportunity to start the long overdue job of simplifying it. It remains a regulatory burden for business that undermines confidence, quashes entrepreneurialism, and inhibits growth.

This budget has made small steps towards addressing a significant challenge, however the Chancellor must start making larger strides to succeed.

As leaders in accountancy, finance and business, ICAEW focuses on ethics, technology and innovative thinking to help organisations and professionals take the long view on key issues. So together, we can achieve more than you’d imagine.

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